Crises in Iraq and elsewhere send oil prices soaring

Iraqi men who volunteered to join the fight against a major offensive by jihadists in northern Iraq stand on army trucks as they leave a recruiting center in the capital Baghdad. The fighting here and in or near several other oil-rich parts of the world have sent crude prices soaring. (Ali Al-Saadi / AFP/Getty Images)

Crude oil prices were headed to their biggest weekly gain of the year on Friday amid fear that the escalating crisis in Iraq could constrain supplies around the world.

Investors were spooked after President Obama said he is considering military action against Islamist insurgents in Iraq, though he ruled out the deployment of ground forces.

West Texas Intermediate crude, the oil on which U.S. prices are based, rose 14 cents to $106.67 a barrel Friday. It was up 4.1% this week to the highest level since September.

Brent crude, which sets the price of most foreign oil, was up 48 cents to $113.50 a barrel. It rose 4.4% this week, the biggest rise in nearly a year.

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Rising oil prices haven't yet translated to higher gasoline prices for U.S. drivers, but that likely will happen in coming weeks, analysts said.

Nationally, gasoline prices have been fairly steady in recent months. The average price of a gallon of regular gasoline in the U.S. on Friday was $3.649, up just slightly from $3.644 a month ago, according to the AAA Fuel Gauge Report.

Californians, as usual, are paying some of the nation's highest gasoline prices already, in part because of the cost of its clean-air blend of fuel. The average price of a gallon of regular gasoline in California was $4.097 on Friday, down from $4.181 a month ago, the AAA said.

Iraq accounts for just a small fraction of domestic oil imports, and the U.S. is much less reliant on foreign oil than in previous years because of rising production in states such as Texas and North Dakota.

But that doesn't matter when fears about supply enter the picture, said Fadel Gheit, senior energy analyst for Oppenheimer and Co.

"Oil is a global commodity," Gheit said. "Whenever there is a shock in one part of the world, it will affect oil prices everywhere."

Crude prices jumped as a sharp "fear premium" set in quickly because of rapid and unexpected gains of the militants in Iraq, Gheit said.

In addition to the unexpected territorial gains of Islamic extremists in Iraq, analysts said investors also are unnerved by the war in Syria, terrorism in Nigeria and fighting in Ukraine.

In oil-rich Nigeria in recent weeks, terrorists have kept up a steady stream of bombings and kidnappings.

"In a situation like this, you could see prices rising even more sharply," Gheit said, "because the outcomes in multiple places are unknown."